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2016 (10) TMI 100 - GUJARAT HIGH COURT

2016 (10) TMI 100 - GUJARAT HIGH COURT - TMI - Reopening of assessment - Addition u/s 68 - Held that:- Assessing Officer cannot without there being anything further on record, reopen the assessment of the same assessee for an earlier year on the same grounds. His attempt to tax income for the assessment year 2007-2008 by passing order of assessment and his action of reopening the assessment of the same assessee on the same ground for the assessment year 2006-2007, would be incongruent. It may be .....

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al has finally concluded against the Revenue that in facts of the case, section 68 cannot be invoked in case of the bank, a view with which we have a strong prima facie agreement. If at all, it was a transaction of depositing the amount by individual depositors, the source of such deposits being M/s. Radhe Finance. Whether such a transaction was genuine, whether the source was properly explained and the creditworthiness of the depositors was also established, are the issues which we fear may not .....

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lenged a notice dated 3.8.2006 issued by the respondent Assessing Officer to reopen the petitioner's assessment for the assessment year 2006-2007. 2. Brief facts are as under. The petitioner is a cooperative bank. For the assessment year 2006-2007, the petitioner had filed the return of income declaring nil income after claiming deduction of ₹ 58.58 lacs (rounded off) under section 80P(2) of the Income Tax Act ( the Act for short). The Assessing Officer took such return in scrutiny. He .....

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of the Act on 12.05.2008 determining total income at Rs. NIL after allowing deduction of ₹ 58,58,153/u/ s. 80P(20(a) of the Act. (2) During the course of Assessment proceedings for AY 2007-08, it was found that the Reserve Bank of India has imposed penalty of ₹ 5,00,000/by observing : (i) The bank has opened certain Current accounts i.e. M/s. Nilkanth Enterprises M/s. Nilkanth Corporation, M/s. Bhileshwar Industrial Estate Developers Ltd. M/s. Radhe Finance and 250 Fixed Deposit acc .....

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gs for AY 2007-08, it was pointed out to the assessee : From these facts it is clear that 250 FDR Accounts were opened in the bank without properly identifying the person and their creditworthiness. The FDRs of 250 persons are made with the bank and the money so deposited is credited in the books of the bank. In this regard you are requested to establish the creditworthiness and identity of the persons in whose name 250 FDR amounting to ₹ 18,000/each totalling to 45 lacs were made alongwit .....

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red by your honour during the course of assessment proceeding vide Letter no. DCIT/CIT11/ 143(2)/BMC/0910 dated 18.12.2009 which is received on 21.12.2009 at 02:30 PM. As regards to the details required by your honour in respect of Name, Addresses, PAN No. etc for the Depositors who have made deposits during the financial year 200506 relevant to the Assessment Year 2006-07 and do not relevant to the above referred asstt. Year i.e. AY :2006-07 and your honour is requested to consider the facts of .....

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n record, counsel for the petitioner submitted that there was no escapement of income in the hands of the petitioner. Notice of reopening was therefore, invalid. The Assessing Officer could not have formed a belief that income chargeable to tax had escaped assessment. Assessing Officer had tried to make additions in the assessment year 2007-2008, which the CIT(Appeals) reversed. 6. On the other hand, learned counsel for the Revenue opposed the petition contending that in the original assessment, .....

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n the ground that the bank had opened 250 fixed deposit accounts on 15th and 16th November, 2005 in various names without properly verifying their business activities or obtaining requisite documents. Such accounts were opened merely based on introduction by existing account holders. Bank had not observed the norms of Reserve Bank of India. The Assessing Officer confronted the assessee with such developments. He pointed out that in such 250 accounts, amount of ₹ 18,000/each was credited, t .....

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nexplained cash credit of the petitioner bank. 8. Ignoring such pleas of the assessee, the Assessing Officer framed the assessment for the assessment year 20072008 on 29.12.2009 in which he added the said sum in the hands of the bank under section 68 of the Act. He noted that despite opportunity being given, the bank failed to provide requisite details regarding complete names, addresses, PAN numbers of the said 250 depositors as also their verification of identity and creditworthiness. 9. Again .....

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of investment was properly explained. Since the amount of ₹ 18,000/in each of the 250 accounts had come from M/s. Radha Finance, addition in hands of the bank therefore, under section 68 should not be made. Thus, though an additional ground raised by the assessee was that in any case the income did not pertain to the assessment year 20072008, the Commissioner did not proceed on such basis. He simply set aside the addition made by the Assessing Officer on the ground that section 68 of the .....

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reiterates the Assessing Officer's findings. It does not rebut the CIT(A)'s findings that the impugned deposits have come from the official liquidator. The assessee supports the CIT(A)'s order. It also submits section 68 does not apply since the impugned transactions have not taken place in the relevant previous year. We are of the opinion that once the assessee has been able to prove the source of the source along with the fact that the depositors are its regular customers, it has .....

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s referred to this very transaction of 250 bank accounts being opened by the petitioner bank in which identical sum of ₹ 18,000/came to be deposited and withdrawn within a short time by each of the account holder. Reserve Bank of India had noticed these transactions and penalised the bank for not following the Reserve Bank of India requirements in the process of opening such bank accounts. 12. For two reasons, the impugned notice must be set aside. Firstly, the Assessing Officer had tried .....

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